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The revenue is not hypothetical. Software companies make billions each year by licensing their products. It is very real. So is piracy, which deprives software companies of revenues and drives up the price and/or introduces DRM which usually makes the product less user friendly for the people who are actually paying for the software.
True, although the numbers they use usually don't have much bearing to reality. They count each case of copies software as a full lost sale when a great many of them never would have been sales anyway. I'm not sure why they need to exaggerate things, often radically, since it just reduces credibility and seems to be counter productive.
(If you study it: In some cases, in the early days, piracy actually increased net income, in some of the 8bit days kids were like man by the time you get the computer you can barely afford any games not worth it but then if they saw they could get some games on the side they went for computers but they still bought every bit as many games as they could on honor and all those sales were extras that happened because of piracy and the starter losses were all stuff that would never have been purchased anyway. Of course, it doesn't always go like that and it's probably been a long, long time since it was ever actually a net plus and later on piracy got completely out of control in some cases, one really bad case was in the later Amiga days over in Europe where piracy on games for it became ridiculous and there were barely any sales, a total disaster, developers got utterly shafted and it collapsed. But there are still times when it's close to a draw and most of the time the losses are much smaller than claimed, not to say the actual realistic losses might not still be bad at times, but more often could've only made like 0.1-25% more, realistically, instead of the 300-60000% more claimed, of course it depends upon the exact circumstance and location, in some regions of the world it is very high these days and even 20% can certainly hurt someone. On an side note: these days a rather high percentage of packed cracks have all sorts of malicious nasties riding along. I almost feel like that is actually a better 'DRM' than anything the software companies do which are often bothersome to legit users these days and never seem to do much in terms of saving any sales that would've been sales.)
DRM can be quite a problem itself though.
The phone home type of DRM is especially pernicious, even if it only has to be done a single time per install, since as soon as the companies goes away so does your software or music or whatnot (RIAA insisted MusicGiants use DRM on all their lossless music, MusicGiants goes under, any music that hadn't been refreshed at the right time before they went under became useless, RIAA didn't give a crap and were basically like just go by it again) and the same has happened to some games and other software. Even on itunes if an app stops getting distributed and you end up needing to restore and ipad the app you paid for is gone and you can't get it back again. With the old codebook type DRM you never had such issues.
And sometimes it can be pretty annoying that companies so cripple and restrict usage that purchased items are almost unusable while pirated copies be used as you wish and easily, which does get frustrating.
The way they try to overly lock down digital media and certain other things sometimes drives away more sales than it creates and/or saves, sometimes noticeably so, for both media and games. Some DRM has been so nasty and people so appalled that I think potential games sales got cut easily multiple times more than piracy would've cost. And for media they sometimes try to scheme up ways to source each usage and usage on device type into so many revenue streams that the restrictions and potential eventual complete losses to the consumer are so annoying that they just lose way more sales than their split stream ever have a hope to make up for, but it all sounds good in the board room when some new MBA presents it.
Anyway it's a tangled subject.